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P2.4: Measurement and Disclosure

CERES ROADMAP EXPECTATION

Companies will disclose a list of their Tier 1 and 2 suppliers and measure and disclose suppliers’ sustainability performance.

Investors Calling for Supply Chain Transprency

Increasingly investors are calling for increased transparency within the supply chain and companies are beginning to ask suppliers to produce their own sustainability reports. Read more..

Check out Roadmap in Action for more examples of how companies are implementing the Ceres Roadmap.

Supplier performance is influenced not only through management systems but also through relevant monitoring, auditing and disclosure. This should include third-party verification, not just internal auditing done by company employees. Ultimately, top performing companies should assign the same degree of scrutiny towards suppliers’ sustainability performance as their own direct operations.

HOW ARE COMPANIES PERFORMING?

In the The Road to 2020: Corporate Progress on The Ceres Roadmap For Sustainability, we evaluated 600 of the largest U.S. companies on their progress towards meeting the expectations laid forth in the Ceres Roadmap for Sustainability using data compiled and analyzed by Sustainalytics. For this expectation, all 600 companies were evaluated and additional analysis was focused on those sectors with clear exposure to supply chain risk—Food & Beverage, Footwear & Apparel, Retail and Technology Hardware. This expectation assessed transparency on the scope and frequency of audits, key audit findings, and disclosure of measures for addressing non-compliance, remediation programs and on-going training and engagement initiatives.

Overall, only 25 percent of the 600 companies (149 companies) have some level of disclosure for supply chain monitoring and performance. Not surprisingly, leading companies for this expectation were primarily represented among the four priority sectors focused on for this expectation. A third of these companies (33 out of 97) are included in Tiers 1 and 2. The Technology Hardware sector has the strongest performance for supply chain transparency, with nearly 40 percent of companies included in Tiers 1 and 2. Putting to rest the fear that transparency in the supply chain translates to a competitive risk, Tier 1 and 2 companies in the Technology Hardware sector such as Hewlett-Packard and Dell disclose a list of their key suppliers.

In early 2012, Apple released a list of its suppliers, as well as a progress report on the company’s auditing process and results. It also hired third-party auditor, the Fair Labor Association (FLA), to undertake a comprehensive assessment of working conditions at key supplier factories in China. These noteworthy actions follow significant allegations that Apple’s heavy production demands have resulted in high stress levels, including suicides among their suppliers’ employees. In March 2012, the FLA disclosed its findings and following their release a major supplier to Apple, mega technology manufacturer Foxconn Technology Group—known for its poor working conditions and high-stress production schedules—made commitments to limit worker hours and increase wages for its more than 1.2 million employees.13

The disclosure of detailed supply chain data allows stakeholders to assess a company’s sustainability performance and, for investors, to more accurately predict the impact of potential social and environmental disruptions. Nike’s sustainability website features an interactive supply chain map highlighting all countries where the company sources goods and services and provides an individual country and factory breakdown of the types of products sourced, the number of factories and workers, the percentage of contract, migrant, and female workers, the average age of workers, and the country’s contribution to quarterly sales.

Intel’s regular internal supplier audits are done in concert with external, third-party audits, and cover each of the criteria in the Electronics Industry Citizenship Coalition (EICC) code. Based in part on the data collected, the company does supplier risk assessments that classify suppliers as low, medium or high risk. The company’s Supplier Continuous Quality Improvement (SCQI) Program includes supplier training, assessments and continuous improvement plans.